Markets This Week, 12/4-12/8, 2023: Is the Hiking Cycle Over?

Economy and Markets: The Week Ahead

Stock markets logged in their fifth straight week of gains, rallying into December after a stellar performance last month. All the main stock indexes notched their 2023 high on Friday after Jerome Powell’s speech failed to dissipate market expectations of  rate cuts next year.

The Dow Jones Industrial Average (DJIA), last week’s biggest winner, surged 2.59%, posting its highest close in almost two years. The index was strongly aided by blockbuster earnings of Salesforce (CRM), which strongly outpaced analysts’ expectations. The S&P 500 (SPX) rose 0.93%, while the Nasdaq Composite (NDAQ) the Nasdaq-100 (NDX) increased 0.48% and 0.18%.

The Federal Reserve Chair said it is too early to determine with certainty that the central bank has achieved “a sufficiently restrictive stance” of its monetary policy and added that rate cut speculations are premature. However, he also acknowledged the inflation rate deceleration in recent months, which, in context of the weak manufacturing reports and declining PCE inflation data, was read by the optimistic investors as a view that policy rates have peaked. Bond yields fell, supporting stocks.

With no market-moving earnings releases scheduled for this week, investors will zoom in on the many important economic reports scheduled to be published in the next few days. The main emphasis will be on the labor market data, which will help investors judge the ongoing impact of the Fed’s previous rate increases.

The policymakers will try to apprehend whether their efforts have led to a cooler job market, which is one of the main factors in their inflation outlook. After the two consecutive quarters of sizzling GDP growth, every major economic report will be thoroughly scrutinized by the data-dependent Fed.

The past five weeks’ rally has put all major indexes firmly in the overbought territory. Bank of America’s (BAC) contrarian “Bull & Bear indicator, based on investor flows and positioning, moved out from the “buy” territory last week. In addition, the American Association of Individual Investors (AAII) reported that the proportion of retail investors who said they are bullish toward stocks has risen to its highest since July. This bullish positioning may make stock markets more vulnerable to sudden drops if investors are spooked by unexpected economic data or negative earnings surprises.   

In this uncertain environment, investors are strongly advised to closely follow economic reports and to base their decisions on trustworthy data and analysis.

Upcoming Earnings and Dividend Announcements

The Q3 2023 reporting has almost ended, but there are still some important reports scheduled this week.  

The most noteworthy earnings events this coming week are the reports of Broadcom (AVGO), Lululemon Athletica (LULU), Autozone (AZO), SentinelOne (S), C3.ai (AI), Campbell Soup (CPB), GameStop (GME), DocuSign (DOCU), and Dollar General (DG).

Companies’ reporting dates, consensus EPS forecasts, past data, analyst ratings, and price targets can be found on the TipRanks Earnings Calendar.

This week, Ex-Dividend dates are coming for the payouts of Nvidia (NVDA), Elevance Health (ELV), Cigna (CI), Blackrock (BLK), Walmart (WMT), Occidental Petroleum (OXY), Walt Disney (DIS), FedEx (FDX), and other dividend-paying firms.

Companies’ Ex-Dividend and Dividend Payment dates, analyst ratings, and price targets can be found on the TipRanks Dividend Calendar.

Upcoming Economic Calendar Events

There are several important reports scheduled to be published in the next few days:

» October’s Factory Orders – Monday, 12/4 – This report, released by U.S. Census Bureau, measures total orders (including durable and non-durable goods) from manufacturers. Thus, this report provides an insight into the trends within the manufacturing sector. The report also serves as one of the leading indicators for the overall economy, as it reflects vendors’ outlook for the consumer demand for manufactured goods.

» November’s ISM Services PMI – Tuesday, 12/5 – This report, published by the Institute for Supply Management, shows business conditions in the U.S. services sector, the largest and most important GDP contributor. The ISM Services PMI is a forward-looking indicator, providing an important insight into the factors that influence GDP growth and inflation. When the business activity index rises, investors may assume that the stock markets will increase because of higher anticipated company earnings.

» November’s Nonfarm Payrolls and Unemployment Rate – Friday, 12/8 – The Nonfarm Payrolls and Unemployment reports, released by the U.S. Bureau of Labor Statistics, present the number of new jobs created during the previous month, and the percentage of people that were actively seeking employment in the previous month. These reports are considered two of the most important economic indicators, as policymakers follow the shift in the number of positions since it is strongly associated with the health of the economy as a whole. One of the mandates of the Federal Reserve is full employment, and it takes labor market changes into account when determining its policy decisions, which influence the capital markets.

» December’s Michigan Consumer Sentiment Index (preliminary) – Friday, 12/8 – This report, published by the University of Michigan, portrays the results of a monthly survey of consumer confidence levels in the United States. The level of confidence affects consumer spending, which contributes about 70% of the U.S. GDP.

Current and scheduled economic reports, Fed statements, and other releases, as well as their level of impact on the stock markets, can be found on the TipRanks Economic Calendar.